Elixinol Wellness Annual Report 2021

Company Overview Financial Report Shareholder Information Key Achievements and Milestones FY2021 Highlights Our global expansion strategy evolved in FY21. The objective was to cement our already strong brand reach by partnering with the most credentialed in-market partners to establish licensing agreements. This gave us a lower cost access to the market while ensuring we benefited from established local expertise. As a result of an uncertain regulatory environment and an economy that was heavily impacted by COVID-19 and Brexit, we made the diœcult decision to close our own European operations and transition to a licensing model in the region. Subsequently, we were delighted to secure a three-year exclusive Trademark and Know-how Licensing Agreement with the UK’s largest CBD manufacturer and distributor, BRITISH CANNABIS , at the end of last year. The deal enables BRITISH CANNABIS to manufacture, market and sell Elixinol CBD products across the UK, ensuring our brand continues to be distributed in this market while realising significant cost savings for the Group. In addition to this new agreement with BRITISH CANNABIS in the UK, we also signed licensing and distribution agreements in Mexico, Malaysia and South Africa to create a foothold in emerging CBD markets that have a positive regulatory outlook. Elixinol has long been an established brand in South Africa where CBD has been legal for some time. Mexico only recently passed legislation to legalise CBD whereas Malaysia is expected to legalise CBD in the near term. Our decision to withdraw from the proposed acquisition of CannaCare Health GmbH in Germany in June last year was another carefully considered decision, based on a well-founded view that moving ahead with the acquisition was not in the best interest of our shareholders. Closing due diligence revealed a changed German market outlook with rapidly intensifying competition in the region. These factors led us to conclude that the acquisition, and the investments that would have been required to generate profitable returns, exceeded our risk appetite. This has proven to be a very wise decision given how quickly the German market dynamics shifted in the second half of last year. 38 % in FY21 compared to FY20 CASHUSED INOPERATIONS reduced by COMPANY OVERV I EW $ 11.7 m from -$23.2m in FY20 to -$11.5m in FY21 ADJUSTED EBITDA IMPROVEMENTS of $ 12.6 m HEALTHY CASH BALANCE of and an additional $2.1m expected to be received under US COVID relief measures 5